Cost and Choice

An Inquiry in Economic Theory

"As he usually does, Professor Buchanan has produced an interesting and provocative piece of work. [Cost and Choice] starts off as an essay in the history of cost theory; the central ideas of the book are traced to Davenport and Knight in the United States, and to a series of distinguished writers associated at various times with the London School of Economics. The author emerges from this discussion with what can be described as the ultimate in subjectivist cost doctrines. . . . Economists should learn the lessons offered to us in this little book—and learn them well. It can save them from serious errors."—William J. Baumol, Journal of Economic Literature

Preface 1. Cost in Economic Theory Classical Economics Marginal-Utility Economics The Marshallian Synthesis Frank Knight and American Neoclassical Programs 2. The Origins and Development of a London Tradition Wicksteed and the Calculus of Choice H. J. Davenport Knight on Cost as Valuation Robbins, 1934 Mises, Robbins, and Hayek on Calculation in a Socialist Economy Hayek, Mises, and Subjectivist Economics The Practical Relevance of Opportunity Cost: Coase, 1938 G. F. Thirlby and "The Ruler" Mises' Human ActionThe Death of a Tradition? Appendix to Chapter 2: Shackle on Decision 3. Cost and Choice The Predictive Science of Economics Cost in the Predictive Theory Cost in a Theory of Choice Choice-Influencing and Choice-Influenced Cost Opportunity Cost and Real Cost The Subjectivity of Sunk Costs Cost and Equilibrium 4. The Cost of Public Goods The Theory of Tax Incidence Costs and Fiscal Decision-Making: The Democratic Model Costs and Decision-Making: The Authoritarian Model Costs and Decision-Making: Mixed Models The Choice Among Projects The Costs of Debt-Financed Public Goods Ricardo's Equivalence Theorem Tax Capitalization 5. Private and Social Cost Summary Analysis A Closer Look Internal Costs, Equilibrium, and Quasi-Rents An Illustrative Example Pigovian Economics and Christian Ethics Narrow Self-Interest and Alternative-Opportunity Quasi-Rents Conclusion 6. Cost Without Markets Prices, Costs, and Market Equilibrium Resource Services Prices as Final Product Costs Market Equilibrium, Costs, and Quasi-Rents The Cost of Military Manpower: An Example The Cost of Crime: Another Example Artificial Choice-Making Socialist Calculation and Socialist Choice Costs in Bureaucratic Choice Index

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